REIT suggestions

[GoCubsGo]

I've owned REIT's as a part of my AA in the past.  A few years ago I leaned tech heavy and basically eliminated REITs.  I'd like to get back to more standard sector allocation (I'm also light financials and energy which I've rectified).  I haven't looked into REITs in a long time.  If you had to pick one REIT to satisfy the allocation, which would you choose?

edited to add:  I've always owned individual REITs to satisfy the allocation. Not sure if I want to do that anymore.  Thoughts?

[RWD]

I've been using VGSLX

[Captain Cactus]

Same here... VGSLX.  Not a large percentage, but enough to round out my AA.

[mistymoney]

do you all have an AA bucket that specifies REITs?

I had just lumped them in with dividend stocks - am I off?

[ChpBstrd]

I'm not a fan of REIT ETFs because I don't want to own malls or offices - two sectors which are being made dinosaurs by technology. Residential, industrial, and healthcare real estate are less prone to disruption. Healthcare faces threats from office conversions, but I think it's harder than it looks to turn an empty office building into a nursing home or hospital.

I like residential ETFs like EQR, MAA, and maybe UMH. I'm shying away from otherwise-attractive residential ETFs concentrated in HCOL areas like ESS because another RE correction could be a triple-whammy of rising interest costs, falling asset prices, and rising discount rates.
I also like healthcare ETFs like OHI, SBRA, NHI, GMRE, LTC, MPW, and HR. These are unappreciated Covid recovery plays too.
Self-storage REITs like EXR, PSA, and SELF have decent dividends and steady businesses.
In the industrial space, I like MNR.

I also own a few preferred stocks for apartment, industrial, and healthcare REITs, including CSR-C, GMRE-A, MAA-I, and MNR-C. Each of these yields over 6%, and is senior to the common dividend. I'm tempted to go all-in on these preferreds and take a year off work. I'm also tempted by MORT, but don't have the guts.

Note: All the above ideas besides MORT is a bet on interest rates staying low.

[Rob_bob]

I'm not a fan of REIT ETFs because I don't want to own malls or offices - two sectors which are being made dinosaurs by technology. Residential, industrial, and healthcare real estate are less prone to disruption. Healthcare faces threats from office conversions, but I think it's harder than it looks to turn an empty office building into a nursing home or hospital.

I like residential ETFs like EQR, MAA, and maybe UMH. I'm shying away from otherwise-attractive residential ETFs concentrated in HCOL areas like ESS because another RE correction could be a triple-whammy of rising interest costs, falling asset prices, and rising discount rates.
I also like healthcare ETFs like OHI, SBRA, NHI, GMRE, LTC, MPW, and HR. These are unappreciated Covid recovery plays too.
Self-storage REITs like EXR, PSA, and SELF have decent dividends and steady businesses.
In the industrial space, I like MNR.

I also own a few preferred stocks for apartment, industrial, and healthcare REITs, including CSR-C, GMRE-A, MAA-I, and MNR-C. Each of these yields over 6%, and is senior to the common dividend. I'm tempted to go all-in on these preferreds and take a year off work. I'm also tempted by MORT, but don't have the guts.

Note: All the above ideas besides MORT is a bet on interest rates staying low.

It looks to me like most of those ticker symbols you mentioned are not ETF's but individual REIT stocks. I know because I own or watch many of them.

[ice_beard]

I have been building a small position in STWD.  They were in acquisition phase during the down turn and have not had to decrease their payout.  They are involved in a lot of lending and less actual ownership of specific properties although they do own some properties.  I knew it was/is a bit of a risk, but it's appreciated nicely.  I consider this a "buy and forget" holding and just let the dividends accrue for the next thirty years.

[alcon835]

I like O for its dependability.

I like RWT and BRMK for solid dividends +  a lot of growth potential over the next few years.

Those are my three. I try not to dip too deeply into REITs, but these three I specifically invest in because I think they're trading at a good price and provide a solid long-term dividend.

I also like some mortgage companies. Right now I'm invested into IVR (expecting high growth over the next 3-5 years) and OMF, because they have a bonkers, but dependable, dividend and are consistently profitable.

[CrankAddict]

I was pretty unimpressed by the performance of my VGSLX during the covid correction.  Many on here suggested REITs don't act like real estate at all, rather they track much more like a stock.  I guess I was naive to think that adding them to my AA was on par with owning property.

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[MustacheAndaHalf]

I also like some mortgage companies. Right now I'm invested into IVR (expecting high growth over the next 3-5 years)

I really dislike IVR - I own it, but it's recovery has been much weaker than other Covid sensitive investments I've made.  They've been dumping shares on the market at an amazing pace, which cuts their recovery price/share almost in half.  When I saw IVR on the list of most popular Robinhood stocks, I figured it would be a bumpy ride.

Do you understand how they use leverage?  My vague understanding is they leveraged their investments before the pandemic, and had to end that approach to survive.

[ChpBstrd]

I was pretty unimpressed by the performance of my VGSLX during the covid correction.  Many on here suggested REITs don't act like real estate at all, rather they track much more like a stock.  I guess I was naive to think that adding them to my AA was on par with owning property.

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Benjamin Graham noted in 1949 that when one owns a house, one does not see a regular quote of how its value changes from day to day, and this creates the illusion of stable value for homes. Likewise, the daily quotes on stocks from "Mr. Market" create the illusion of unstable value for stocks. Just as most shares were not sold during the dip, most homeowners did not put their houses up for auction during the dip. I suspect if they did put their houses up for auction, they would have received a startling low price, just like people selling their REIT shares did. Instead what happened is lots of houses sat on sale for a little bit longer, waiting for Mr. Market's price to reach an acceptable level. Meanwhile, their market prices might have dipped and recovered violently.

[CrankAddict]

I was pretty unimpressed by the performance of my VGSLX during the covid correction.  Many on here suggested REITs don't act like real estate at all, rather they track much more like a stock.  I guess I was naive to think that adding them to my AA was on par with owning property.

Sent from my SM-G960U1 using Tapatalk

Benjamin Graham noted in 1949 that when one owns a house, one does not see a regular quote of how its value changes from day to day, and this creates the illusion of stable value for homes. Likewise, the daily quotes on stocks from "Mr. Market" create the illusion of unstable value for stocks. Just as most shares were not sold during the dip, most homeowners did not put their houses up for auction during the dip. I suspect if they did put their houses up for auction, they would have received a startling low price, just like people selling their REIT shares did. Instead what happened is lots of houses sat on sale for a little bit longer, waiting for Mr. Market's price to reach an acceptable level. Meanwhile, their market prices might have dipped and recovered violently.

There's obviously truth to what you are saying, but here in the Midwest the housing market is hot.  Inventories are low and things are selling fast for a nice profit over their prices from just a few years ago.  Meanwhile VGSLX is still sitting at summer 2019 prices.  I basically wanted a fund for my 401k that would track housing prices so the REIT left me wanting. It was probably just me having the wrong expectations.

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[vand]

Good article here about REIT/stock correlation
https://fourpillarfreedom.com/are-reits-and-stocks-correlated/

Although I have some exposure to REITs & property funds I don't consider them a substitute for a rental.  Also, there simply isn't very much historical data on REITs, and most of it is within a paradigm that has been very kind to the asset class.

[chasesfish]

I don't like the REIT index.  REITs can't retain earnings, so they have to issue shares to raise capital or sell assets if something goes wrong.

I invest in REITs, but it's like other real estate investments, your returns are dictated by the price you pay and the risk profile you choose.

I've done well with STOR, ILPT, and STAG in the past year.  I was hurt on EPR by overpaying and buying too early.  RLJ lodging was a home run since I bought it at the right price.  I also made some near risk free money buying REIT preferreds at a discount after a few months ago after doing research on the underlying company.

What are you looking to accomplish with REITs?  Personally I like REITs in the low risk/low return part of my portfolio and will take my risk in other parts of the market where companies can retain their earnings to grow.

[alcon835]

I was pretty unimpressed by the performance of my VGSLX during the covid correction.  Many on here suggested REITs don't act like real estate at all, rather they track much more like a stock.  I guess I was naive to think that adding them to my AA was on par with owning property.

Sent from my SM-G960U1 using Tapatalk

Benjamin Graham noted in 1949 that when one owns a house, one does not see a regular quote of how its value changes from day to day, and this creates the illusion of stable value for homes. Likewise, the daily quotes on stocks from "Mr. Market" create the illusion of unstable value for stocks. Just as most shares were not sold during the dip, most homeowners did not put their houses up for auction during the dip. I suspect if they did put their houses up for auction, they would have received a startling low price, just like people selling their REIT shares did. Instead what happened is lots of houses sat on sale for a little bit longer, waiting for Mr. Market's price to reach an acceptable level. Meanwhile, their market prices might have dipped and recovered violently.

There's obviously truth to what you are saying, but here in the Midwest the housing market is hot.  Inventories are low and things are selling fast for a nice profit over their prices from just a few years ago.  Meanwhile VGSLX is still sitting at summer 2019 prices.  I basically wanted a fund for my 401k that would track housing prices so the REIT left me wanting. It was probably just me having the wrong expectations.

Sent from my SM-G960U1 using Tapatalk

REIT value has significantly less to do with the value of the properties owned and more to do with the income generated from those properties [mostly rents and loan payments...which are still down overall]. There is no market, stock, eft, etc. that I'm aware of that tracks against property value, nor could it. There is no revenue in real estate in and of itself. The closest you could possibly get to would be a company that focuses on buying and flipping houses in a short amount of time and those companies wouldn't be able to do so in the current market.

[alcon835]

I also like some mortgage companies. Right now I'm invested into IVR (expecting high growth over the next 3-5 years)

I really dislike IVR - I own it, but it's recovery has been much weaker than other Covid sensitive investments I've made.  They've been dumping shares on the market at an amazing pace, which cuts their recovery price/share almost in half.  When I saw IVR on the list of most popular Robinhood stocks, I figured it would be a bumpy ride.

Do you understand how they use leverage?  My vague understanding is they leveraged their investments before the pandemic, and had to end that approach to survive.

I think you misunderstood what happened to them at COVID. Their investments was inherently risky so they sold off something like 70-80% of their portfolio last March when the pandemic hit. That's what caused the huge drop. Their sub-$3 value post-April 2020 was actually pretty spot-on for them at their book value. Of course, this dropped overall income, so their dividend dropped too. Since then, they've been pivoting on their business model into less risky mortgages (though not completely abandoning them) and have been rebuilding. It's going well, from what I can tell. In Q4 they posted .10/share profit for the quarter - and there is good reason to think they'll be able to keep profitable in 2021. As of yesterday's earnings announcement, their actual book value is ~$3.86/share which is about in line with their stock price.
 
They're actively rebuilding, and I have no doubt they'll forget all about COVID in 12 months and jump right back into the risky plays that made them so profitable originally. Between then and now, I expect they'll continue to slowly increase book value grow the dividend, and post better quarter-over-quarter earnings.

If you don't want to wait 12-18 months from right now to see solid growth, I recommend jumping ship to other stocks. I know you also dabble a lot in options, but I personally wouldn't play options on IVR. Too potentially volatile without significant return likely.

[MustacheAndaHalf]

I also like some mortgage companies. Right now I'm invested into IVR (expecting high growth over the next 3-5 years)

I really dislike IVR - I own it, but it's recovery has been much weaker than other Covid sensitive investments I've made.  They've been dumping shares on the market at an amazing pace, which cuts their recovery price/share almost in half.  When I saw IVR on the list of most popular Robinhood stocks, I figured it would be a bumpy ride.

Do you understand how they use leverage?  My vague understanding is they leveraged their investments before the pandemic, and had to end that approach to survive.

I think you misunderstood what happened to them at COVID. Their investments was inherently risky so they sold off something like 70-80% of their portfolio last March when the pandemic hit. That's what caused the huge drop. Their sub-$3 value post-April 2020 was actually pretty spot-on for them at their book value. Of course, this dropped overall income, so their dividend dropped too. Since then, they've been pivoting on their business model into less risky mortgages (though not completely abandoning them) and have been rebuilding. It's going well, from what I can tell. In Q4 they posted .10/share profit for the quarter - and there is good reason to think they'll be able to keep profitable in 2021. As of yesterday's earnings announcement, their actual book value is ~$3.86/share which is about in line with their stock price.
 
They're actively rebuilding, and I have no doubt they'll forget all about COVID in 12 months and jump right back into the risky plays that made them so profitable originally. Between then and now, I expect they'll continue to slowly increase book value grow the dividend, and post better quarter-over-quarter earnings.

If you don't want to wait 12-18 months from right now to see solid growth, I recommend jumping ship to other stocks. I know you also dabble a lot in options, but I personally wouldn't play options on IVR. Too potentially volatile without significant return likely.

That's interesting - I could very well be wrong about them.  I noted their sharp drop in March, and equally sharp spike in early June, and figured that was the signature of a Covid sensitive stock - it's very similar to Macy's.  The expectation of high unemployment also fit the story of a mortgage investment company struggling.

I bought most of my IVR call options back in Aug 2020.  Those calls did much better than the S&P 500 (up +13% since Aug 2020), but did much worse than other investments.  I probably over-invested in IVR, hurting my returns overall.

What I see is a company that diluted it's stock from 128M to 230M shares.  If they recover to their 2019 market cap, that would mean $9 to $10/sh.  If that happens in 2021, I'll have to take back my comment about it doing worse than other investments.  How do you see their prospects this year?

I have calls on other REITs as well, but IVR is the largest investment of my REITs.

[alcon835]

I also like some mortgage companies. Right now I'm invested into IVR (expecting high growth over the next 3-5 years)

I really dislike IVR - I own it, but it's recovery has been much weaker than other Covid sensitive investments I've made.  They've been dumping shares on the market at an amazing pace, which cuts their recovery price/share almost in half.  When I saw IVR on the list of most popular Robinhood stocks, I figured it would be a bumpy ride.

Do you understand how they use leverage?  My vague understanding is they leveraged their investments before the pandemic, and had to end that approach to survive.

I think you misunderstood what happened to them at COVID. Their investments was inherently risky so they sold off something like 70-80% of their portfolio last March when the pandemic hit. That's what caused the huge drop. Their sub-$3 value post-April 2020 was actually pretty spot-on for them at their book value. Of course, this dropped overall income, so their dividend dropped too. Since then, they've been pivoting on their business model into less risky mortgages (though not completely abandoning them) and have been rebuilding. It's going well, from what I can tell. In Q4 they posted .10/share profit for the quarter - and there is good reason to think they'll be able to keep profitable in 2021. As of yesterday's earnings announcement, their actual book value is ~$3.86/share which is about in line with their stock price.
 
They're actively rebuilding, and I have no doubt they'll forget all about COVID in 12 months and jump right back into the risky plays that made them so profitable originally. Between then and now, I expect they'll continue to slowly increase book value grow the dividend, and post better quarter-over-quarter earnings.

If you don't want to wait 12-18 months from right now to see solid growth, I recommend jumping ship to other stocks. I know you also dabble a lot in options, but I personally wouldn't play options on IVR. Too potentially volatile without significant return likely.

That's interesting - I could very well be wrong about them.  I noted their sharp drop in March, and equally sharp spike in early June, and figured that was the signature of a Covid sensitive stock - it's very similar to Macy's.  The expectation of high unemployment also fit the story of a mortgage investment company struggling.

I bought most of my IVR call options back in Aug 2020.  Those calls did much better than the S&P 500 (up +13% since Aug 2020), but did much worse than other investments.  I probably over-invested in IVR, hurting my returns overall.

What I see is a company that diluted it's stock from 128M to 230M shares.  If they recover to their 2019 market cap, that would mean $9 to $10/sh.  If that happens in 2021, I'll have to take back my comment about it doing worse than other investments.  How do you see their prospects this year?

I have calls on other REITs as well, but IVR is the largest investment of my REITs.

I would be surprised if they're at $9/10 by EOY.

[bacchi]

There is no market, stock, eft, etc. that I'm aware of that tracks against property value, nor could it.

The Case-Shiller home price index, and its futures, track property value.

https://fred.stlouisfed.org/series/SPCS20RSA/

https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index

[ChpBstrd]

There is no market, stock, eft, etc. that I'm aware of that tracks against property value, nor could it.

The Case-Shiller home price index, and its futures, track property value.

https://fred.stlouisfed.org/series/SPCS20RSA/

https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index

Perhaps this is what you'd need to manage the risk of home prices running away:
https://www.cmegroup.com/trading/real-estate/files/housing-fact-card.pdf
https://www.homepricefutures.com/posts/how-to-get-started-trading-cme-case-shiller-home-prices-contracts
This was a learning experience for me.

[Steveray7071]

I like WPC - Good dividend, good history of increasing dividends, good balance sheet, diverse across sectors and countries and a nice growth model.

[PDXTabs]

I don't own any individual REITs, but I do sometimes look at farmland REITs like Iroquois Valley and LAND.